Logo of the Internal Revenue Service

Logo of the Internal Revenue Service (Photo credit: Wikipedia)

Here are the major tax highlights:

   • Bush-era income tax rates (10%, 15, 25, 28, 33 and 35% for each income bracket) will be the “permanent” law of the land (whatever permanent means to Congress!) for single filers making less than $400K and married’s filing jointly making less than $450K.

   • Capital gains and qualified dividends increase to 20% — but only for those single filers  and marrieds making more than the thresholds just mentioned. For everyone else, capital gains stays at 15% (and nothing for those in the 10 and 15% brackets)

   • Various deductions were retained, including:
        • Educator expenses above-the-line deduction
        • Mortgage debt cancellation relief
        • Employer provided mass transit and parking benefits
        • Private mortgage insurance (PMI) itemized deduction
        • Tuition and fees above-the-line deduction
        • Required minimum distribution (RMD) direct rollover to charity

The best part for we tax professionals is that the AMT was permanently “patched”, which means that there *should* be no delay in e-filing for this tax season!

Beyond the specifics of the deal, the process was terrible, in my opinion. Even though lawmakers knew this reality was coming for two years (on the tax side), they waited until New Year‘s Eve to strike a deal that passed through the Senate at 2 a.m. on New Year’s Day. The public had very little chance to review — let alone understand — the legislation. So much for transparency.

In future comments, we will talk more about the tax changes. In the meantime, if you have questions on your personal situation, we are more than happy to discuss that with you.

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